Hyundai Wia ( KS)

Transcription

1 Company Report ( KS) Auto parts Weaker top-line growth, but margins still strong 4Q12 review: 8.5% OPM beats consensus Ês 4Q12 consolidated earnings beat our forecasts and the market consensus, with revenue of W1.9tr (+11.1% YoY) and operating profit of W166bn (+76.4% YoY). Hence, Ês 4Q12 OP margin improved to 8.5% (4Q11 OPM: 5.4%). Pretax profit also increased by 84.2% YoY to W167bn. We believe Ês efforts throughout the year to improve sales mix and productivity at both its automotive and machinery divisions are showing results. The automotive divisionês sales mix has benefited from the increase in power train (engine and transmission) parts, while the machinery division benefited from the strong sales growth of its factory automation (FA) products. Meanwhile, we attribute the solid 4Q12 margin improvement to: 1) strong growth in engine sales at the firmês Chinese facilities, 2) increased high-margin CKD exports, and 3) the weak yen, which lowered procurement costs from Japan. Strong momentum in China to continue in 2013 Ês 2012 EPS increased 76.6% YoY, which could prove to be a burden for the company in We project substantially slower production growth for both Hyundai Motor (HMC) and Kia (in step with a weak macro environment). We project this will then lead to weak order momentum at Ês machinery business. However, we believe strong momentum in China for HMC and Kia will boost Hyundai Wia earnings, as: 1) Wia will benefit from the first full year of capacity additions that became operational in 2H12 (engines and materials processing lines), and 2) increased high-margin CKD exports to China. Additionally, we project the weak yen will continue to lower procurement costs from Japan for core machinery parts. Thus, despite weak top-line growth, we estimate Ês net profit will increase 8.6% YoY in Maintain Buy rating, but Lower TP to W215,000 We maintain our Buy rating on, but lower our 12-month target price 6.1% to W215,000 (previously W229,000). This revision stems from our reduced 2013F operating profit (by 7.5%). We have incorporated our projections for weaker production at HMC and Kia, and the subsequent lack of new order momentum at WiaÊs machinery division. However, we do believe Ês margins will remain stable thanks to strong momentum in China for HMC and Kia. Additionally, we project continued, solid growth within the Hyundai Motor Group for FA products from WiaÊs machinery division, as Kia is preparing to launch a 3 rd Chinese plant by April We believe the stability of Ês margins in the first half will definitely distinguish the firm from the rest of the sector, which we expect will face weak 1H13 earnings momentum. Daewoo Securities Co., Ltd. Michael Yun michael.yun@dwsec.com Young-ho Park youngho.park@dwsec.com Buy (Maintain) Target Price (12M, W) 215,000 Share Price (02/01/13, W) 151,500 Expected Return (%) 41.9 EPS Growth (13F, %) 8.4 Market EPS Growth (13F, %) 17.1 P/E (13F, x) 8.6 Market P/E (13F, x) 9.3 KOSPI 1, Market Cap (Wbn) 3,898 Shares Outstanding (mn) 26 Avg Trading Volume (60D, '000) 159 Avg Trading Value (60D, Wbn) 26 Dividend Yield (13F, %) 1.1 Free Float (%) Week Low (W) 122, Week High (W) 194,500 Beta (12M, Daily Rate of Return) 1.03 Price Return Volatility (12M Daily, %, SD) 2.3 Foreign Ownership (%) 17.2 Major Shareholder(s) HMC et al. (41%) NPS (9.28%) Price Performance (%) 1M 6M 12M Absolute Relative Earnings & Valuation Metrics FY Revenues OP OP margin NP EPS EBITDA FCF ROE P/E P/B EV/EBITDA (Wbn) (Wbn) (%) (Wbn) (Won) (Wbn) (Wbn) (%) (x) (x) (x) 12/10 5, , /11 6, , /12P 7, , /13F 7, , /14F 8, , Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, estimates Share price 150 KOSPI /12 5/12 9/12 1/13 Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S.

2 Table 1. 4Q12 earnings review 4Q11 3Q12 4Q12P % (Wbn,%) Actual KDB Daewoo Cons. YoY QoQ Revenue 1,749 1,741 1,943 1,875 1, Operating profit pre-adjusted OP margin Pretax profit Net profit Note: Net profit = net profit attributable to controlling interests Source: Company data, FnGuide, Table 2. Quarterly and annual earnings (Wbn,%) F 1Q13F % 1Q 2Q 3Q 4QP 1Q 2Q 3Q 4Q YoY QoQ 2012P 2013F 2014F Revenue 1,652 1,685 1,741 1,943 1,704 1,871 1,853 1, ,021 7,411 8,414 Operating profit Pretax profit Net profit OP margin Net margin Notes: 1) Net profit = net profit attributable to controlling interests; 2) OP has been adjusted to reflect new accounting changes Source: Company data, Table 3. Quarterly earnings breakdown by division (Wbn, %) 2012P 2013F 1Q13F % 1Q 2Q 3Q 4QP 1Q 2Q 3QP 4Q YoY QoQ 2012P 2013F 2014F Revenue Automotive 1,255 1,237 1,256 1,526 1,332 1,388 1,388 1, ,274 5,552 6,356 Machinery ,748 1,859 2,058 Sum 1,652 1,685 1,741 1,943 1,704 1,871 1,853 1, ,021 7,411 8,414 OP Automotive Machinery Sum OP margin Automotive Machinery Sum Notes: 1) Net profit = net profit attributable to controlling interests; 2) OP has been adjusted to reflect new accounting changes Source: Company data, Table 4. Earnings forecast revisions (Wbn, W, %) Previous Revised % change 2012F 2013F 2014F 2012P 2013F 2014F 2012P 2013F 2014F Comments Revenue 6,953 7,985 9,498 7,021 7,411 8, Reflected HMC & KiaÊs production Operating profit Revised down US$/W Pretax profit Revised up China business sales Net profit Revised down machinery sales EPS 15,681 17,702 21,062 16,263 17,634 20, OP margin Net margin Automotive revenue 5,112 5,767 6,813 5,273 5,552 6, Automotive OP Machinery revenue 1,841 2,218 2,685 1,748 1,859 2, Machinery OP Notes: 1) Net profit = net profit attributable to controlling interests; 2) OP has been adjusted to reflect new accounting changes Source: 2

3 Figure 1. P/E band Figure 2. P/B band (W) 350, X 17.0X (W) 350, X 300, , , X 10.0X 300, , , X 2.3X 150, , X 100, ,000 50,000 50, F 14F F 14F Source: Thomson Reuters, Source: Thomson Reuters, Table 5. Global peer valuation comparison Performance (%) EPS (W,JPY,EUR,US$) OP margin (%) EV/EBITDA (x) P/E (x) Relative P/E (%) -1M -3M 12F 13F YoY,% 12F 13F 12F 13F 12F 13F 12F 13F Mando ,950 12, Toyota Ind Denso BorgWarner ,263 17, Mobis ,547 36, JCI Keihin Autoliv Aisin NOK Faurecia Valeo Continental Lear Magna TRW Source: Bloomberg, Figure 3. Global auto part suppliersê P/E vs. EPS growth (2013F) Figure 4. Global auto part suppliersê P/B vs. ROE (2013F) (P/E, x) BorgWarner Toyota Ind. (P/B, x) 2.5 BorgWarner 13 Denso JCI 12 Autoliv 11 Keihin Magna Aisin NOK 10 Lear 9 TRW Mando 8 Valeo Continental Faurecia 7 Mobis (EPS growth, %) JCI Continental TRW Autoliv Lear Denso Magna Mando Mobis Valeo Faurecia Toyota Ind. Aisin NOK (ROE, %) Keihin Source: Bloomberg, Source: Bloomberg, 3

4 ( KS/Buy/TP: W215,000) Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (Wbn) 12/11 12/12P 12/13F 12/14F (Wbn) 12/11 12/12P 12/13F 12/14F Revenues 6,393 7,021 7,411 8,414 Current Assets 2,695 2,720 2,756 3,075 Cost of Sales 5,810 6,198 6,529 7,413 Cash and Cash Equivalents Gross Profit ,001 AR & Other Receivables 1,519 1,392 1,375 1,508 SG&A Expenses Inventories Operating Profit (Adj) Other Current Assets Operating Profit Non-Current Assets 1,558 1,853 2,107 2,272 Non-Operating Profit Investments in Associates Net Financial Income Property, Plant and Equipment 1,223 1,352 1,508 1,613 Net Gain from Inv in Associates Intangible Assets Pretax Profit Total Assets 4,253 4,573 4,863 5,347 Income Tax Current Liabilities 2,160 1,943 1,890 1,887 Profit from Continuing Operations AP & Other Payables 1,447 1,443 1,423 1,517 Profit from Discontinued Operations Short-Term Financial Liabilities Net Profit Other Current Liabilities Controlling Interests Non-Current Liabilities Non-Controlling Interests Long-Term Financial Liabilities Total Comprehensive Profit Other Non-Current Liabilities Controlling Interests Total Liabilities 2,757 2,691 2,566 2,573 Non-Controlling Interests Controlling Interests 1,452 1,833 2,245 2,716 EBITDA Capital Stock FCF (Free Cash Flow) Capital Surplus EBITDA Margin (%) Retained Earnings 1,067 1,472 1,887 2,362 Operating Profit Margin (%) Non-Controlling Interests Net Profit Margin (%) Stockholders' Equity 1,495 1,882 2,298 2,774 Cash Flows (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/11 12/12P 12/13F 12/14F 12/11 12/12P 12/13F 12/14F Cash Flows from Op Activities P/E (x) Net Profit P/CF (x) Non-Cash Income and Expense P/B (x) Depreciation EV/EBITDA (x) Amortization EPS (W) 9,421 16,263 17,634 20,167 Others CFPS (W) 13,325 20,606 22,575 25,366 Chg in Working Capital BPS (W) 51,830 66,374 82, ,158 Chg in AR & Other Receivables DPS (W) 500 1,500 1,700 1,750 Chg in Inventories Payout ratio (%) Chg in AP & Other Payables Dividend Yield (%) Income Tax Paid Revenue Growth (%) Cash Flows from Inv Activities EBITDA Growth (%) Chg in PP&E Operating Profit Growth (%) Chg in Intangible Assets EPS Growth (%) Chg in Financial Assets Accounts Receivable Turnover (x) Others Inventory Turnover (x) Cash Flows from Fin Activities Accounts Payable Turnover (x) Chg in Financial Liabilities ROA (%) Chg in Equity ROE (%) Dividends Paid ROIC (%) Others Liability to Equity Ratio (%) Increase (Decrease) in Cash Current Ratio (%) Beginning Balance Net Debt to Equity Ratio (%) Ending Balance Interest Coverage Ratio (x) Source: Company data, estimates 4

5 Important Disclosures & Disclaimers Disclosures As of the publication date, Daewoo Securities Co., Ltd and/or its affiliates do not have any special interest with the subject company and do not own 1% or more of the subject company's shares outstanding. Stock Ratings Industry Ratings Buy Relative performance of 20% or greater Trading Buy Relative performance of 10% or greater, but with volatility Hold Relative performance of -10% and 10% Sell Relative performance of -10% Overweight Fundamentals are favorable or improving Neutral Fundamentals are steady without any material changes Underweight Fundamentals are unfavorable or worsening (W) 250, , , ,000 50, /11 8/11 2/12 7/12 1/13 * Ratings and Target Price History (Share price (----), Target price (----), Not covered ( ), Buy ( ), Trading Buy ( ), Hold ( ), Sell ( )) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analystês estimate of future earnings. The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions. Analyst Certification The research analysts who prepared this report (the Analysts ) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this report. Daewoo Securities Co., Ltd. policy prohibits its Analysts and members of their households from owning securities of any company in the AnalystÊs area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, like all employees of Daewoo Securities, the Analysts receive compensation that is impacted by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Daewoo Securities Co., Ltd. except as otherwise stated herein. Disclaimers This report is published by Daewoo Securities Co., Ltd. ( Daewoo ), a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such information has not been independently verified and Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Korean language. If this report is an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising from the use hereof. This report is for general information purposes only and it is not and should not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any laws and regulations or subject Daewoo and its affiliates to registration or licensing requirements in any jurisdiction should receive or make any use hereof. Information and opinions contained herein are subject to change without notice and no part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Daewoo. Daewoo, its affiliates and their directors, officers, employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making or other financial services as are permitted under applicable laws and regulations. The price and value of the investments referred to in this report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. 5

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